Paradoxical situation with natural gas tankers

LNG Gas Erdgas Tanker Spanien Rückumwandlung Trader Händler
There are long lines of natural gas tankers off Europe. (Image: Ian Simmonds / unsplash)

Dozens of tankers carrying liquefied natural gas are parked off the coasts of Europe. This is surprising, because there is a shortage of supply. But one explanation sounds logical.

Several dozen of these tankers with liquefied natural gas (LNG) have been spotted off the coast of Spain. This was reported by numerous media, citing observers and analysts.

Via trigger apps, radar recordings and tracking systems, the accumulation of the ships is also confirmed, according to “Reuters“.

Similar ‘traffic jams’ of such LNG transport ships were also observed off the United Kingdom and in the Mediterranean.

Supply despite shortage

The amount of liquefied natural gas currently being shipped is at an all-time high, at about 2.5 million tons, also emerges the data on the situation provided by the specialized portal ““.

This situation is paradoxical: in Europe there is actually a shortage of gas in many places and prices are skyrocketing. But, apparently, there is reportedly liquid gas in abundance.

Spain waves off

The reason for the unusual situation was initially suspected to be the shortage of capacity for the reconversion of the gas from the liquid to the gaseous state. However, the Spanish authorities were able to refute this because the slots for such conversions had to be booked well in advance.

In addition, there are currently no requests for emergency situations for the unloading of additional tankers, according to the responsible LNG converter enagás.

Also, the gas storage facilities in Spain are already very well filled at around 93 percent, which is why there is hardly any additional demand for further LNG deliveries anyway.

Distribution as a problem

Scarce capacities for the reconversion of LNG exist at best in Germany. That’s why two floating platforms are being set up there, under high pressure, for this purpose. 

So what could be causing the ‘congestion’ off the coasts of Spain and the UK? For one thing, no gas can be transported from Spain to other European countries because there is no corresponding pipeline to France, Germany or to northern Europe. Such a pipeline is only in the planning stage.

Price level in view

Rather, financial analysts identify a completely different reason for these long queues of tankers in addition to the scarce capacities at places of high demand. While the gas is in the tankers, it is not available to any storage facility or pipeline.

Therefore, the market cannot have that amount of gas available, they said. That gas, practically, does not exist. And currently, prices for later deliveries of natural gas in Europe are about two dollars per mmBtu (million British thermal units) higher than for any immediate deliveries.

This may have encouraged traders to continue to keep their cargoes offshore, with queues hoping to derive higher prices in November and December.

More cargo on the way

At the same time, however, dozens of LNG tankers are still en route from the U.S. to Europe. In September, 87 cargoes left U.S. terminals with a volume of about 6.25 million tons of natural gas, according to statistics. About 70 percent of those are on their way to Europe.

If all the traders of this cargo also speculate on higher prices, there could possibly be an oversupply at the end of the day and the price level – also for Switzerland – could actually drop surprisingly in the coming winter.


Paradoxical situation with natural gas tankers

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